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Friday, September 7, 2012

Analysts see high demand for Battersea project apartments

PETALING JAYA: The market is cautious about the RM40bil Battersea Power Station project in London but it expects strong take-up rate for the apartments to be launched under phase one.

SP Setia Bhd and Sime Darby Bhd have a 40% stake each in the project while the Employees Provident Fund (EPF) has the remaining stake.

The first phase will consist of 800 apartments above a commercial podium with an estimated gross development value (GDV) of £1bil (RM5bil).

The units are from 500 sq ft to 1,400 sq ft and priced from 900 pounds to £1,300 per sq ft.

HLIB Research analysts said the pricing of the apartments was in line with other projects in the vicinity, which could fetch up to £1,500 per sq ft.

“We expect a strong take-up rate given SP Setia's pool of Malaysian and international buyers,” they pointed out.

The launch of the first phase of the Battersea Power Station project has been set for early April. The soft launch is expected to be in January while construction should start in April.

The first phase would also include the refurbishment of the power station.

Analysts said SP Setia did not specify the amount that will be contributed for the refurbishment.

A senior analyst from a local bank-backed research house said it was more likely that construction for the first phase would start in the third quarter of next year.

“There are still approvals that have yet to be given,” he said.

The approvals for the building plan are expected to be obtained by year-end.

The first phase will take up only 25% of the total 3,266 residential units allowed on the 39.1 acre site. However, it will only account for 12.5% of the overall GDV of £8bil (RM39.8bil).

SP Setia's portion for Battersea's site would amount to about RM800mil. The acquisition will be financed by a 60:40 debt-to-equity ratio. Chief executive officer Tan Sri Liew Kee Sin had said the consortium had acquired a £300mil bridging loan from CIMB Bank.

The remaining £100mil were settled according to the equity stake of SP Setia, Sime Darby, and EPF.

SP Setia has decided to pursue equity funding with a proposed placement of new shares of up to 15% of its share capital to institutional investors, which will be identified via a book-building exercise.

Based on an assumed placement price of RM3.19, the company would be able to raise about RM957.4mil.

The senior analyst said most of the funds would go to the Battersea project. The remaining funds would be utilised for SP Setia's other projects such as the 1National Institute of Health, Complex Setia Alam, the redevelopment of Bangsar land, as well as ongoing and future projects.

RHB Research analyst Loong Kok Wen said in a report: “We have estimated a funding commitment of RM600mil solely for the Battersea project for the first two years.”

Loong did not discount the possibility of more fund raising activities given the size of the Battersea project, its working capital requirement, future projects and landbanking exercises.

The placement exercise would still require the approval of Bursa Malaysia, as well as the company's shareholders.

By The Star

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